Monday, July 12, 2010

The latest Congressional Budget Office projection of the federal debt suggests doubt among budget analysts that lawmakers will enforce some attempts to curb health spending under health reform.

The CBO again this year made two projections for the U.S.' long-term debt. The first is derived from current laws that govern spending. The second “alternative” scenario adjusts projections for likely ways that tax and spending policies will stray from those laws.

The latter, the CBO notes, is considered a “more realistic picture of the nation's underlying fiscal policy.” It is also far grimmer.

Even the rosier projection is sobering. If the nation sticks to current laws, the federal debt will grow to account for more than three-quarters (79%) of the economy in the next 25 years.

But CBO analysts contend that lawmakers may continue to tax and spend as before, regardless of laws that dictate otherwise. Under this alternative scenario, lawmakers would adopt changes that scale back tax revenue and increase healthcare spending, driving the debt to dwarf the economy at a projected 185% of gross domestic product by 2035.

Under the alternative scenario, doctors would not see Medicare payments cut by roughly-one fifth, as scheduled by law, but would instead see gains in coming years. Indeed, in late June, President Barack Obama signed into law a six-month delay to the 21.1% cut. The CBO also estimates that by 2020, Congress will scrap some provisions to curb Medicare spending and reject planned reductions to insurance subsidies for those with low incomes.

If lawmakers jettison some health reform Medicare provisions—the physician pay cut and some spending restrains after 2020, such as those set by the new Independent Payment Advisory Board—Medicare spending in 2035 would be 17% greater than it might have been, the CBO said.

Budget analysts also calculated the cost should lawmakers undo a scheduled reduction to insurance subsidies for low-income people in 2018. Combined, these changes would increase federal health spending for Medicare, Medicaid, the Children's Health Insurance Program and insurance subsidies to 11% of the GDP by 2035, compared with 10% under the reform laws enacted in March.

Under health reform, Medicare spending is projected to slow to 2% per year from 4%, but the CBO cautions the more sluggish pace may not be sustainable or could compromise access to care and quality. The agency also warns that its long-term projections get shakier the further out they go.